National Grid appreciates this opportunity to submit comments on proposed Rules 55 and 56 and a proposed amendment to Rule 87 under the Public Utility Holding Company Act of 1935, as amended (the Act). National Grid Group plc is a foreign holding company registered under the Act and is the indirect parent of National Grid USA, also a registered holding company. National Grid currently operates under a comprehensive Commission order dated March 15, 2000 ("March Order," Holding Company Act Release No. 27154).

National Grid believes that the Commission should be flexible in its interpretation of the Act with respect to foreign utility companies (FUCOs). The interplay between United States and foreign regulatory, accounting, and tax regimens requires that the Commission be flexible to assure that economic efficiencies are realized. The Commission demonstrated this flexibility in its March Order approving National Grid. National Grid believes that the proposed rules should not undermine the flexibility of the Commission and its Staff to craft approvals, such as the March Order, that protect United States investors and customers while preserving the economic efficiencies of foreign and domestic investments.

Proposed Rule 55

(1) National Grid does not believe that it is appropriate to "require" board of directors' approval for investments in foreign utility companies. The laws of the controlling jurisdiction should determine what entity approvals would be required for each investment. If board of directors' approval is to be required by Rule 55, National Grid proposes that it only apply to material investments and that the board be permitted to delegate its approval to a committee of the board.

(2) In its March Order, the Commission acknowledges that the books and records of National Grid's foreign utility companies did not have to be maintained in accordance with US GAAP, provided that National Grid make a reconciliation to US GAAP in the manner required by Form 20-F. National Grid believes that this type of flexibility should be added to the US GAAP requirements in Rule 55(c).

(3) With respect to Rule 55(d), National Grid proposes that the registered holding company be allowed to send a letter to each affected regulator providing the EDGAR references for filings rather than being required to provide paper copies. This would be consistent with national efforts toward electronic record keeping.

Proposed Amendments to Rule 87

(4) National Grid believes that proposed Rule 87(d) would unnecessarily restrict the beneficial sharing of best practices and expertise in both directions to the detriment of customers. Moreover, proposed Rule 87(d) as currently drafted would seem to restrict the rendering of services among associate companies that are EWG's and FUCO's. At a minimum, National Grid proposes that Rule 87(d) be redrafted to not prevent companies under the FUCO umbrella from providing services to each other.

(5) National Grid does not believe that proposed Rule 87(d) and (e) should require an application for affiliate service transactions meeting the pricing standards of Rules 90 and 91. State Commissions have adequate authority to monitor and restrict affiliate transactions with their jurisdictional utilities. National Grid does not believe that there is a need to require filings when the pricing standards of Rules 90 and 91 are being observed.

Commission Reviews of Certain Investments

(6) National Grid believes that the Commission should interpret Section 33 of the Act to permit non-utility businesses to be held by a FUCO. In its March Order, the Commission reviewed the various holdings and investments of National Grid and found them to be consistent with the standards of section 11(b)(1) of the Act. National Grid believes that the financial safeguards built into proposed Rule 55 provide adequate assurance that diversified business investments will not cause a significant detriment to the financial integrity of regulated electric and/or gas companies. Therefore, National Grid does not believe that diversified foreign business activities or the scope and size of these activities should preclude a claim of FUCO status.

Miscellaneous Comments

(7) National Grid does not believe that FUCO investments should be "required" to be insured against political and exchange risks. National Grid believes that the decision to insure a particular risk is better left to management. Management is best able to analyze these risks compared with the cost of insurance and the level of protection available for a particular investment.

(8) Item 9(c) to Form U5S should be clarified to provide that rate increases for retail customers of nonexempt utility companies are to be disclosed and not rate increases for FUCO customers.

(9) The instructions to Form U-57 should be clarified to provide that follow-on investments in a previously acquired FUCO do not require the filing of an additional form.

Finally, although not a member of the "Repeal PUHCA Now! Coalition", National Grid has read the Coalition's comment letter in this file and finds its comments to be well considered and generally adopts them as its own. If you have any questions, please do not hesitate to call.